Dynamic Linkages among Carbon, Energy and Financial Markets: Multiplex Recurrence Network Approach

Minggang Wang, Chenyu Hua and Hua Xu
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Minggang Wang: School of Mathematical Science, Jiangsu University, Zhenjiang 212000, China
Chenyu Hua: School of Mathematical Science, Jiangsu University, Zhenjiang 212000, China
Hua Xu: Department of Mathematics, Nanjing Normal University Taizhou College, Taizhou 225300, China

Mathematics, 2022, vol. 10, issue 11, 1-23

Abstract: It has become a hot issue to integrate the carbon market, energy market, and financial market into one system and explore the relationship among them. Considering that the carbon market, energy market, and financial market all have chaotic characteristics to varying degrees, this paper proposes a theoretical framework to study the linkage relationship among the three markets on the basis of the method of the Multiplex recurrence network. Firstly, we built a multiplex recurrence network of carbon-energy-financial market. Then, based on the connection relationship among nodes of the recurrence network of each market, the degree distribution of nodes of each market, and the information entropy theory, we put forward several metric indicators to explore the correlativity and mutual guidance relation among carbon market, energy market and financial market from micro and macro perspectives. Using the data generated by the deterministic system, the effectiveness of the defined index was confirmed by numerical simulation. The empirical analysis of the carbon market, energy market, and financial market revealed the evolution process of the increasingly close connection between the three markets, and we found that the carbon market plays an increasingly important role in the world capital market system. Based on the research results, we propose some suggestions for market decision-makers, enterprises, and investors.

Keywords: carbon market; energy market; financial market; multiplex recurrence network (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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